SEMIANNUAL REPORT
January 31, 1996
INVESCO
SMALL
COMPANY
FUND
A no-load fund seeking
long-term capital growth.
INVESCO FUNDS
<PAGE>
Economic Overview February 1996
1995 will long stand out as a banner year for U.S. investors. The S&P
achieved a total return of 37.44% for the 12 months ended 12/31/95, only the
fourth time in fifteen years the broad market returned over 25%. By other
measures, market results were even more exciting: The Dow Jones Industrial
Average broke 5000 for the first time in history, and fixed-income markets
followed suit, with the Lehman Government/Corporate Bond Index gaining
19.24%.(1)
In January 1996 the stock market whipsawed in the wake of stalled federal
budget negotiations. Yet continuing economic easing by the Fed, including a
0.25% short-term interest rate decrease on 1/31/96, helped the S&P 500 rise to
new heights, ending the month up 3.45%.
Despite strong January performance, this year corporate earnings
improvements almost certainly won't see the dramatic gains enjoyed in 1994 and
1995. While a budget settlement in Washington seems uncertain, it is expected
that the Federal Reserve will continue to gradually reduce interest rates. We
believe this will lead to a slow-growth trend for the economy, as well as the
stock and bond markets, during 1996.
/s/ R. Dalton Sim
- ----------------------
R. Dalton Sim
Chairman and President
INVESCO Trust Company
Small Company Fund
For the six-month period ended 1/31/96, Small Company Fund had a total
return of 7.32%.(2) This performance exceeded the Russell 2000 Index of smaller
capitalization stocks, which returned 6.01% for the same period.(1) The fund's
strong performance came after a period of slower growth due to substantial new
investments during a sharply rising market.
Small Company Fund
Average Annualized Total Return
as of 1/31/96(2)
1 year 29.25%
-----------------------------------
Since inception (12/93) 11.93%
-----------------------------------
The line graph illustrates the value of a $10,000 investment in INVESCO
Small Company Fund and the index plus reinvested dividends and capital gain
distributions, if any, from inception through 1/31/96. The chart and other total
return figures cited reflect the fund's operating expenses. However, the index
does not have expenses, which would, of course, have lowered its performance.(2)
<PAGE>
Graph:
This line graph represents a comparison of the value of a $10,000
investment in INVESCO Small Company Fund to the value of a $10,000
investment in the Russell 2000 Index, assuming in each case reinvestment
of all dividends and capital gain distributions, for the period from
inception (12/1/93) through 1/31/96
Strategic Overview
Historically, small capitalization stocks have outperformed large-cap
stocks. Small Company Fund is managed to profit from this long-term trend, with
the additional goal of exceeding the broad returns of the small-cap market.
With this historical data in mind, we do not attempt to time the market or
second-guess sector performance. Instead, we seek to participate in and exceed
general small-cap growth levels by selecting those stocks that appear likely to
outperform their peers within each sector.
Our management technique involves a unique combination of quantitative and
qualitative analysis. Each month, we use a proprietary model that ranks stocks
based on their exposure to 13 factors, including price/earnings ratios, earnings
momentum, inventory, and sales trends, among others.
These factors are used to analyze and rank approximately 2,500 stocks,
each with characteristics similar to those included in the Russell 2000
Index.(1) Once ranked, we choose the most attractive stocks within each general
sector, weighting the fund to roughly equal the sector allocations held by the
benchmark index.
Once this quantitative analysis has been completed, we apply a qualitative
approach to determine the best stocks available within each sector. In making
our final selection, we utilize traditional fundamental analysis techniques to
isolate those stocks which we believe are positioned to outperform their peers.
Current Profile
As of 1/31/96, the fund's strongest investment emphasis was in finance, at
22% of net assets. This was closely followed by consumer cyclicals at 16%, and
technology at 14%. Smaller allocations are spread across consumer staples,
energy, transportation, and utilities, reflecting the approximate weightings of
the Russell 2000 composite for the same period.(1)
Looking Forward
In our estimation, small-cap stocks are currently undervalued relative to
larger-capitalization equities. Additionally, a slow- down in large-cap growth
could potentially occur if the projected economic softening takes place.
Therefore, we feel Small Company Fund is positioned to benefit from any
potential improvement in small-cap performance relative to the market at large.
<PAGE>
Graph: Small Company Fund Diversification
by Value of Net Assets(3)
This bar graph reflects the allocation of the INVESCO Small Company Fund's
portfolio by value of net assets in Basic Materials, Capital Goods
& Construction, Consumer Cyclical, Consumer Staples, Energy, Finance,
Technology, Transportation & Services, Utilities, and Cash & Equivalents
for the periods ending 1/95, 7/95, and 1/96.
Fund Manager
INVESCO Small Company Fund is managed by Bob Slotpole, senior vice
president and director of equities for INVESCO Management & Research, Inc. He
earned an MBA from Stanford University, as well as a BS from the State
University of New York at Buffalo. Bob has nearly two decades of investment
experience, and before joining INVESCO in 1993, he was associated with First
Boston and Lehman Brothers.
(1) The S&P 500 and Dow Jones Industrial Average are unmanaged indexes
considered representative of the performance of the broad U.S. stock market. The
Lehman Government/Corporate Index is an unmanaged index representative of the
broad fixed-income market. The Russell 2000 is an unmanaged index representative
of small- and medium-cap stocks.
(2) Total return assumes reinvestment of dividends and capital gain
distributions for the periods indicated. Investment return and principal value
will fluctuate so that, when redeemed, an investor's shares may be worth more or
less than when purchased. Of course, past performance is not a guarantee of
future results.
(3) Holdings are subject to change.
<PAGE>
INVESCO Fund Codes
These two-digit codes appear after your account number on Investment
Summaries and confirmations. You may also use them to request information about
specific funds on PAL(R), your Personal Account Line.
Money Market Funds
44 U.S. Government Money Fund
25 Cash Reserves
40 Tax-Free Money Fund
Tax-Exempt Funds
36 Tax-Free Intermediate Bond
35 Tax-Free Long-Term Bond Income Funds
33 Short-Term Bond
32 U.S. Government Securities
47 Intermediate Government Bond
30 Select Income
31 High Yield
Multiple Asset Funds
71 Balanced
70 Multi-Asset Allocation
48 Total Return
Equity-Income Funds
15 Industrial Income
58 Utilities
Growth Funds
10 Growth
20 Dynamics
74 Small Company
60 Emerging Growth
46 Value Equity
Sector Funds
50 Energy
59 Environmental Services
57 Financial Services
51 Gold
52 Health Sciences
53 Leisure
55 Technology
38 Worldwide Capital Goods
39 Worldwide Communications
International Funds
49 International Growth
56 European
37 European Small Company
34 Latin American Growth
41 Asian Growth
54 Pacific Basin
For more information about any of the INVESCO Funds, including management fees
and expenses, please call us at 1-800-525-8085 for a prospectus. Read it
carefully before you invest or send money.
<PAGE>
INVESCO Diversified Funds, Inc. -- Small Company Fund
Ten Largest Common Stock Holdings
January 31, 1996
Description Value
- ------------------------------------------------------------
Sonat Offshore Drilling $1,489,838
Smith (A O) Corp 1,466,400
Pulte Corp 1,435,500
Credence Systems 1,137,675
Phycor Inc 1,015,200
Alaska Air Group 1,001,325
Public Storage 975,963
Union Planters 909,876
Measurex Corp 906,525
United Stationers 878,600
Composition of holdings is subject to change.
<PAGE>
INVESCO Diversified Funds, Inc. -- Small Company Fund
Statement of Investment Securities
January 31, 1996
UNAUDITED
Shares or
Principal
Description Amount Value
- ------------------------------------------------------------------------------
COMMON STOCKS 89.07%
ADVERTISING 0.36%
True North Communications 11,600 $213,150
------------
AEROSPACE & DEFENSE 0.86%
Precision Castparts 12,800 510,400
------------
AUTOMOBILE RELATED 1.75%
Borg-Warner Automotive 23,300 675,700
OEA Inc 9,100 234,325
Smith (A O) Corp 5,300 133,162
------------
1,043,187
------------
BANKING 6.80%
ALBANK Financial 21,800 613,125
CCB Financial 13,000 679,250
Chittenden Corp 4,300 123,087
Cullen Frost Bankers 4,300 209,625
First Michigan Bank 5,733 163,390
Mark Twain Bancshares 8,300 317,475
National Commerce Bancorp 6,000 166,500
North Fork Bancorporation 9,700 250,987
Riggs National* 13,200 176,550
Summit Bancorp 4,500 145,125
USBANCORP Inc 8,900 295,925
Union Planters 29,832 909,876
------------
4,050,915
------------
BROADCASTING 0.55%
Renaissance Communications* 9,000 177,750
Silver King Communications* 5,200 148,200
------------
325,950
------------
BUILDING & CONSTRUCTION RELATED 3.23%
Granite Construction 7,500 223,125
Oakwood Homes 5,900 264,025
Pulte Corp 43,500 1,435,500
------------
1,922,650
------------
<PAGE>
CHEMICALS 0.73%
Cytec Industries* 5,700 434,625
------------
COMPUTER RELATED 3.42%
Auspex Systems* 14,700 233,362
Cognos Inc* 2,400 95,100
Computervision Corp* 15,200 188,100
Continuum Co* 7,100 279,562
Integrated Systems* 2,800 108,500
Network General* 16,800 672,000
Phamis Inc* 5,000 130,625
Trident Microsystems* 11,400 156,750
Wonderware Corp* 10,600 169,600
------------
2,033,599
------------
CONTAINERS 1.24%
AptarGroup Inc 9,600 357,600
West Co 15,400 381,150
------------
738,750
------------
CONTROL INSTRUMENTS 1.52%
Measurex Corp 30,600 906,525
------------
COSMETICS & TOILETRIES 0.40%
Carter-Wallace Inc 16,500 237,187
------------
ELECTRICAL EQUIPMENT 0.41%
Baldor Electric 11,950 244,975
------------
ELECTRONICS 4.62%
BMC Industries 24,200 517,275
C-Cube Microsystems* 6,600 396,000
Logicon Inc 5,600 153,300
Marshall Industries* 5,400 172,125
Photronics Inc* 11,000 266,750
Pioneer Standard Electronics 25,700 301,975
Sterling Electronics* 13,335 200,025
Teleflex Inc 2,800 112,700
Watkins-Johnson Co 10,700 411,950
Wyle Electronics 7,200 217,800
------------
2,749,900
------------
FINANCE RELATED 1.19%
Fair Issac & Co 7,600 205,200
Inter-Regional Financial Group 7,350 159,862
PHH Corp 2,600 133,900
Robert Half International* 5,000 210,625
------------
709,587
------------
<PAGE>
FOOD PRODUCTS & BEVERAGES 1.04%
Flowers Industries 15,000 198,750
International Multifoods 14,100 260,850
Robert Mondavi Class A* 5,300 159,000
------------
618,600
------------
HEALTH CARE RELATED 1.00%
Sierra Health Services* 2,300 78,200
Universal Health Services Class B* 5,000 249,375
Vencor Inc* 7,089 270,268
------------
597,843
------------
HOTELS 0.70%
Prime Hospitality* 41,400 414,000
------------
INSURANCE 5.81%
Berkley (W R) Corp 11,500 577,875
Commerce Group 2,500 48,437
Horace Mann Educators 17,500 579,687
Mutual Risk Management 5,700 245,100
NAC Re 4,100 139,400
Protective Life 23,500 816,625
Reliance Group Holdings 15,000 131,250
Selective Insurance Group 8,300 308,137
Vesta Insurance Group 4,500 131,625
Washington National 18,200 484,575
------------
3,462,711
------------
INVESTMENT BROKERS 0.32%
Alex Brown 3,900 190,125
------------
JEWELRY 0.34%
Tiffany & Co 3,700 204,887
------------
MACHINERY 2.07%
Duriron Co 10,000 230,000
Harnischfeger Industries 8,094 274,184
Lawson Products 7,200 172,800
Regal Beloit 30,300 552,975
------------
1,229,959
------------
MEDICAL RELATED 6.11%
Advanced Technology Laboratories* 9,100 247,975
American Medical Response* 3,300 102,300
AMSCO International* 20,300 289,275
Invacare Corp 8,600 245,100
Mentor Corp 11,300 317,812
Nellcor Puritan Bennett* 5,100 316,200
Neurogen Corp* 8,500 257,125
<PAGE>
PhyCor Inc* 21,150 1,015,200
Target Therapeutics* 12,800 700,800
Vivra Inc* 5,850 147,712
------------
3,639,499
------------
MEDICAL RELATED -- DRUGS 1.00%
Bergen Brunswig Class A 17,700 466,838
Watson Pharmaceuticals* 2,800 128,100
------------
594,938
------------
METALS & MINING 2.69%
Cleveland-Cliffs Inc 5,500 239,938
Global Industrial Technologies* 16,300 370,825
J&L Specialty Steel 22,900 406,475
Lukens Inc 11,300 309,338
Zeigler Coal Holding 20,100 276,375
------------
1,602,951
------------
MOTION PICTURES & TELEVISION 0.35%
Carmike Cinemas Class A* 8,900 206,925
------------
NURSING HOMES 0.45%
Horizon/CMS Healthcare* 9,800 268,275
------------
OIL & GAS RELATED 5.68%
Diamond Shamrock 9,300 265,050
Louis Dreyfus Natural Gas* 12,800 158,400
Smith International* 62,400 1,466,400
Sonat Offshore Drilling 32,300 1,489,838
------------
3,379,688
------------
PAPER & PAPER PRODUCTS 1.13%
Chesapeake Corp 8,000 227,000
Rock-Tenn Co Class A 17,500 284,375
Universal Forest Products 19,500 160,875
------------
672,250
------------
POLLUTION CONTROL EQUIPMENT
& SERVICES 0.31%
Lydall Inc* 8,700 182,700
------------
PRINTING & PUBLISHING 1.53%
Banta Corp 11,800 498,550
Media General Class A 7,900 263,663
Meredith Corp 3,300 150,150
------------
912,363
------------
<PAGE>
REAL ESTATE RELATED 5.02%
Beacon Properties 11,800 293,525
CBL & Associates Properties 7,100 145,550
Duke Realty Investments 10,300 330,888
FelCor Suite Hotels 5,000 149,375
Gables Residential Trust SBI 6,900 159,563
Highwoods Properties 5,700 173,850
Liberty Property Trust SBI 9,900 219,038
Merry Land & Investment 7,300 167,900
Public Storage 47,900 975,963
Shurgard Storage Centers Class A 7,500 202,500
Wellsford Residential Property Trust SBI 7,400 171,125
------------
2,989,277
------------
RECREATION SERVICES 0.39%
Grand Casinos* 7,800 233,025
------------
RETAIL 6.29%
Apple South 13,800 243,225
Applebee's International 1,700 31,663
Buffets Inc* 37,500 515,625
Caseys General Stores 8,800 202,400
Claire's Stores 13,400 256,275
CompUSA Inc* 11,600 411,800
Consolidated Stores* 8,900 178,000
Jostens Inc 6,800 156,400
Riser Foods Class A 9,300 137,175
Ross Stores 7,400 148,000
Smith's Food & Drug Centers Class B 5,300 134,488
Sports Authority* 12,500 250,000
Sunglass Hut International* 15,400 428,313
Waban Inc* 19,600 377,300
Zales Corp* 19,900 274,869
------------
3,745,533
------------
SAVINGS & LOAN 2.62%
Cal Fed Bancorp* 12,700 198,437
Charter One Financial 8,800 278,300
First Financial 11,200 245,000
Sovereign Bancorp 57,330 569,717
TCF Financial 8,200 269,575
------------
1,561,029
------------
SCHOOLS 0.67%
DeVRY Inc* 14,600 397,850
------------
SEMICONDUCTOR EQUIPMENT 3.31%
Actel Corp* 15,400 192,500
Burr-Brown Corp* 2,300 62,100
Credence Systems* 46,200 1,137,675
<PAGE>
Cypress Semiconductor* 28,000 392,000
Oak Technology* 3,700 185,000
------------
1,969,275
------------
TELECOMMUNICATIONS 2.48%
Aspect Telecommunications* 7,700 284,900
Digital Systems International* 7,800 100,425
LCI International* 32,900 781,375
Octel Communications* 8,400 308,700
------------
1,475,400
------------
TEXTILES & APPAREL MANUFACTURERS 1.13%
Authentic Fitness 4,500 108,563
G & K Services Class A 9,300 232,500
Springs Industries Class A 8,300 332,000
------------
673,063
------------
TRANSPORTATION 4.52%
Alaska Air Group* 50,700 1,001,325
America West Airlines Class B* 17,900 306,538
ValuJet Inc* 8,600 191,350
Varlen Corp 22,100 535,925
Werner Enterprises 18,000 387,000
Wisconsin Central Transportation* 3,600 270,000
------------
2,692,138
------------
UTILITIES 3.12%
Central Maine Power 17,700 276,563
CILCORP Inc 3,000 132,000
Commonwealth Energy Systems SBI 8,000 374,000
IES Industries 13,400 381,900
Minnesota Power & Light 12,700 366,713
ONEOK Inc 15,600 325,650
------------
1,856,826
------------
WHOLESALE 1.91%
FoxMeyer Health 11,800 256,650
United Stationers 38,200 878,600
------------
1,135,250
------------
TOTAL COMMON STOCKS
(Cost $49,139,165) 53,027,780
------------
<PAGE>
SHORT-TERM INVESTMENTS
REPURCHASE AGREEMENTS 10.93%
Repurchase Agreement with
State Street Bank & Trust Co
dated 1/31/1996 due 2/1/1996
at 5.000%, repurchased at
$6,505,903 (Collateralized by
US Treasury Bonds due 5/15/2017
at 8.750%, value $6,646,472)
(Cost $6,505,000) $6,505,000 $6,505,000
------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $55,644,165)
(Cost for Income Tax
Purposes $55,728,356) $59,532,780
============
* Security is non-income producing.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. -- Small Company Fund
Statement of Assets and Liabilities
January 31, 1996
UNAUDITED
ASSETS
Investment Securities at Value~
(Cost $55,644,165~) $59,532,780
Cash 3,294
Receivables:
Fund Shares Sold 66,020
Dividends and Interest 36,332
Prepaid Expenses and Other Assets 165,633
------------
TOTAL ASSETS 59,804,059
------------
LIABILITIES
Payable for Fund Shares Repurchased 22,746
------------
Net Assets at Value $59,781,313
============
NET ASSETS
Paid-in Capital* $53,505,548
Accumulated Overdistributed Net Investment Income (1,658)
Accumulated Undistributed Net Realized Gain
on Investment Securities and Foreign Currency
Transactions 2,388,808
Net Appreciation of Investment Securities and
Foreign Currency Transactions 3,888,615
------------
Net Assets at Value $59,781,313
============
Net Asset Value, Offering and Redemption
Price per Share $12.33
============
~ Investment securities at cost and value at January 31, 1996 include a
repurchase agreement of $6,505,000.
* The Fund has 100 million authorized shares of common stock, par value of
$0.01 per share, of which 4,848,667 were outstanding at January 31, 1996.
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. -- Small Company Fund
Statement of Operations
Six Months Ended January 31, 1996
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $302,696
Interest 96,685
Foreign Taxes Withheld (55)
------------
TOTAL INCOME 399,326
------------
EXPENSES
Investment Advisory Fees 175,019
Transfer Agent Fees 16,371
Administrative Fees 8,500
Custodian Fees and Expenses 10,592
Directors' Fees and Expenses 4,904
Professional Fees and Expenses 13,493
Registration Fees and Expenses 22,172
Reports to Shareholders 2,369
Other Expenses 2,809
------------
TOTAL EXPENSES 256,229
Fees and Expenses Absorbed
by Investment Adviser (17,695)
Fees and Expenses Paid Indirectly (5,175)
------------
NET EXPENSES 233,359
------------
NET INVESTMENT INCOME 165,967
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities and
Foreign Currency Transactions 2,845,730
Change in Net Appreciation of Investment Securities
and Foreign Currency Transactions 420,572
------------
NET GAIN ON INVESTMENT SECURITIES 3,266,302
------------
Net Increase in Net Assets from Operations $3,432,269
============
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Statement of Changes in Net Assets
Six Months Year
Ended Ended
January 31 July 31
------------- ------------
1996 1995
UNAUDITED
OPERATIONS
Net Investment Income $165,967 $151,017
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 2,845,730 800,723
Change in Net Appreciation of
Investment Securities and
Foreign Currency Transactions 420,572 3,762,809
------------- ------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS 3,432,269 4,714,549
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (169,934) (206,316)
Net Realized Gain on
Investment Securities (1,179,362) 0
------------- ------------
TOTAL DISTRIBUTIONS (1,349,296) (206,316)
------------- ------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 71,672,367 42,475,361
Reinvestment of Distributions 1,350,610 182,674
------------- ------------
73,022,977 42,658,035
Amounts Paid for Repurchases
of Shares (55,395,705) (20,569,337)
------------- ------------
NET INCREASE IN NET ASSETS
FROM FUND SHARE TRANSACTIONS 17,627,272 22,088,698
------------- ------------
Total Increase in Net Assets 19,710,245 26,596,931
NET ASSETS
Beginning of Period 40,071,068 13,474,137
------------- ------------
End of Period (Including
Accumulated Undistributed
(Overdistributed) Net Investment
Income of ($1,658) and
$2,309, respectively) $59,781,313 $40,071,068
============= ============
FUND SHARE TRANSACTIONS
Shares Sold 5,869,761 3,982,583
Shares Issued from Reinvestment
of Distributions 109,685 16,914
------------- ------------
5,979,446 3,999,497
Shares Repurchased (4,534,403) (1,977,122)
------------- ------------
Net Increase in Fund Shares 1,445,043 2,022,375
============= ============
See Notes to Financial Statements
<PAGE>
INVESCO Diversified Funds, Inc. - Small Company Fund
Notes to Financial Statements
UNAUDITED
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Diversified
Funds, Inc. (the "Fund"), was incorporated in Maryland on April 2, 1993, and
presently consists of the Small Company Fund. The Fund's investment objective is
to seek long-term capital growth. The Fund is registered under the Investment
Company Act of 1940 (the "Act") as a diversified, open-end management investment
company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. SECURITY VALUATION - Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales price
in the market where such securities are primarily traded. If last sales prices
are not available, securities are valued at the highest closing bid price
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of directors.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith by
the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or market
value if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTS - Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the repurchase agreements
including accrued interest.
<PAGE>
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are accounted for on the trade date and dividend income is recorded
on the ex dividend date. Certain dividends from foreign securities will be
recorded as soon as the Fund is informed of the dividend if such information is
obtained subsequent to the ex dividend date. Interest income, which may be
comprised of stated coupon rate, market discount and original issue discount, is
recorded on the accrual basis. Cost is determined on the specific identification
basis. Net realized and unrealized gain or loss from investments includes
fluctuations from currency exchange rates and fluctuations in market value.
D. FEDERAL AND STATE TAXES - The Fund has complied and continues to comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax purposes,
taxable as ordinary income to shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions to shareholders are recorded by the Fund on the ex
dividend/distribution date. The Fund distributes net realized capital gains, if
any, to its shareholders at least annually, if not offset by capital loss
carryovers. Income distributions and capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions, nontaxable dividends, net
operating losses and expired capital loss carryforwards.
F. EXPENSES - Under an agreement between the Fund and the Fund's Custodian,
agreed upon Custodian Fees and Expenses are reduced by credits granted by the
Custodian from any temporarily uninvested cash. Such credits are included in
Fees and Expenses Paid Indirectly in the Statement of Operations.
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group,
Inc. ("IFG") serves as the Fund's investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of 0.75% of average net assets.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO
Management & Research, Inc. ("IMR"), an affiliate of IFG, investment decisions
of the Fund are made by IMR. Fees for such sub-advisory services are paid by
IFG.
<PAGE>
In accordance with an Administrative Agreement, the Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.015% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
IFG receives a transfer agent fee at an annual rate of $14.00 per
shareholder account, or per participant in an omnibus account. IFG may pay such
fee for participants in omnibus accounts to affiliates or third parties. The fee
is paid monthly at one-twelfth of the annual fee and is based upon the actual
number of accounts in existence during each month.
IFG and IMR have voluntarily agreed, in some instances, to absorb certain
fees and expenses incurred by the Fund.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months
ended January 31, 1996, the aggregate cost of purchases and proceeds from sales
of investment securities (excluding all U.S. Government securities and
short-term securities) were $47,427,500 and $33,828,120, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At January 31, 1996, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $5,309,233 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $1,504,809 resulting in net
appreciation of $3,804,424.
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or IMR.
The Fund has adopted an unfunded noncontributory defined benefit pension
plan covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement.
Pension expenses for the six months ended January 31, 1996, included in
Directors' Fees and Expenses in the Statement of Operations were $157. Unfunded
accrued pension costs of $196 and pension liability of $663 are included in
Prepaid Expenses and Accrued Expenses, respectively, in the Statement of Assets
and Liabilities.
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of the Fund. The Fund
agrees to pay annual fees and interest on the unpaid principal balance based on
prevailing market rates as defined in the agreement. For the six months ended
January 31, 1996, there were no such borrowings.
<PAGE>
INVESCO Diversified Funds, Inc. -- Small Company Fund
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Six Months Year Period
Ended Ended Ended
January 31 July 31 July 31
------------ ------------ ------------
1996 1995 1994^
UNAUDITED
PER SHARE DATA
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $11.77 $9.76 $10.00
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.05 0.06
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.82 2.05 (0.28)
------------ ------------ ------------
Total from Investment Operations 0.86 2.10 (0.22)
------------ ------------ ------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.04 0.09 0.02
Distributions from Capital Gains 0.26 0.00 0.00
------------ ------------ ------------
Total Distributions 0.30 0.09 0.02
------------ ------------ ------------
Net Asset Value - End of Period $12.33 $11.77 $9.76
============ ============ ============
TOTAL RETURN 7.32%* 21.64% (2.21%)*
RATIOS
Net Assets - End of Period
($000 Omitted) $59,781 $40,071 $13,474
Ratio of Expenses to Average Net Assets# 0.51%*@ 1.00% 1.00%~
Ratio of Net Investment Income to
Average Net Assets# 0.36%* 0.84% 1.20%~
Portfolio Turnover Rate 77%* 73% 55%*
<FN>
^ From December 1, 1993, commencement of operations, to July 31, 1994.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
# Various expenses of the Fund were voluntarily absorbed by IFG and IMR for the
six months ended January 31, 1996, for the year ended July 31, 1995 and for
the period ended July 31, 1994. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 0.55% (not
annualized), 1.32% and 1.64% (annualized), respectively, and ratio of net
investment income to average net assets would have been 0.31% (not
annualized), 0.52% and 0.56% (annualized), respectively.
@ Ratio reflects Total Expenses, less Expenses Absorbed expenses by Investment
Adviser.
~ Annualized
</FN>
</TABLE>
<PAGE>
INVESCO FUNDS
To receive general information and prospectuses
on any of INVESCO's funds or retirement plans,
or to obtain current account or price information,
call toll-free:
1-800-525-8085
To reach PAL(R), your 24-hour Personal Account
Line call: 1-800-424-8085
Or write to:
INVESCO Funds Group, Inc.,(sm) Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
If you're in Denver, pleas visit one of our
convenient Investor Centers:
Cherry Creek, 155-B Fillmore Street;
Denver Tech Center, 7800 East Union
Avenue, Lobby Level
This information must be preceded or
accompanied by an effective prospectus.
